- POSTED: 16 Jul 2014 20:24
Bank of America Wednesday reported a 43 per cent drop in second-quarter earnings weighed down by heavy litigation costs in the aftermath of the housing bust.
NEW YORK: Bank of America Wednesday reported a 43 per cent drop in second-quarter earnings weighed down by heavy litigation costs in the aftermath of the housing bust.
Earnings fell to US$2.0 billion in large part due to US$4 billion in litigation expenses. But the bank pointed to lower non-litigation expenses and reported gains in some categories, including investment banking fees.
"The economy continues to strengthen, and our customers and clients are doing more business with us," said chief executive Brian Moynihan. "Among other positive indicators, consumers are spending more, brokerage assets are up by double digits and our corporate clients are increasingly turning to us to help finance business expansion and merger activity. We are well positioned for further progress."
All of the big US banks have faced extensive legal costs after the financial crisis, as US regulators and private investors seek redress for mortgage-linked securities that sank in value after the housing bust.
Bank of America in the first quarter of 2014 reported a loss of US$276 million following a US$6 billion legal charge to settle mortgage-related lawsuits.
Bank of America is in talks with the US Justice Department on another big settlement to settle allegations it misled investors. The bank said the latest legal charge relates "to previously disclosed legacy mortgage-related matters."
The bank announced it would pay a US$650 million settlement to insurer AIG on mortgage-backed securities.
Bank of America's earnings translated into per-share profits of 19 cents, compared with analyst forecasts for 29 cents per share. The legal expense shaved 22 cents per share from earnings.
Revenues fell 4.3 per cent to US$21.96 billion, above the US$21.62 billion forecast by analysts. Shares fell 1.1 per cent to US$15.64 in pre-market trade.